Donald Trump's flawed immigration vs economy argument: He's got it all wrong... and how

As president, Donald Trump was never going to be a saviour of immigrants.

A major reason for why he became popular was his promise of building a wall to keep out people trying to come into the US. Thus no one was really surprised when he announced his support for a legislation that would reduce the number of legal immigrants allowed into the US by half while moving to a "merit-based" system favouring English-speaking skilled workers for residency cards.

Now the idea obviously splits the people it affects into for and against camps. Anyone seeking to emigrate to the US is against it as it reduces their chances to do so. While American workers will tend to support it as conventional wisdom says that it will lead to more jobs and higher wages for them.

At its very core, the argument for restricting immigrants is exceedingly simple to make: Outsiders are coming in and they are taking our jobs. Or at the very least, they are increasing the supply of labour which causes wages to fall.

Immigration boosts the economy

Except, this is a very narrow view of the situation where a trend is being declared based on a minuscule amount of empirical date. Where people have actually made the effort and conducted studies (available here, here and here), the conclusion has invariably been that far from taking jobs from the natives, immigrants actually boost economic activity and raise opportunities and incomes for everyone.

Representational Image. AFP

Representational Image. AFP

This effect can also be explained through real-life examples, as given in The Atlantic. The first concept which explains how someone entering the economy helps natives is "complementarity". The example given for this is if you're an engineer and the immigrant is hired as a construction worker. While alone you might not be of much practical use, together you can build a building. On an individual level this increases the productivity of the native and immigrant. Similarly the immigrant household worker lets the parents put in more hours at work while the immigrant driver allows natives to utilise the time they would have spend in driving.

Now this is fine till the native is higher up on the economic ladder. But what about everyone else? Specifically what about those who are in the same jobs as the immigrants? The Atlantic report answers this by pointing to the fact that then these natives are then pushed into looking for better work. Work which pays better. Thus as more immigrants get jobs building things in a factory, more courier companies hire natives to deliver those things to customers and to manage the entire exercise. Immigrants thus push the natives higher up the economic ladder. Even apart for looking for better jobs after starting their careers, immigration also spurs natives towards better education.

The basic idea thus remains that as more and more workers enter the economy, it grows and other, better positions open up for the natives. Now, this will not be true for every case but by and large, the studies support this hypothesis.

The Bracero example

A very practical study (as summarised on Vox) conducted around the Bracero program explains this phenomenon very clearly. The Bracero program allowed the US to give out guest worker visas to Mexicans to work on the US farms. When the program ended, the number of immigrants dropped heavily. Theoretically, this should have led to an increase in the wages of the natives.

In practice, that did not happen. Employers did not fulfil their demand for labour by raising wages. Instead they started using more machinery and changed the crops they grew. “The starkest example is California tomato picking, where the excluded braceros were mostly replaced by mass-adoption of mechanised harvesters within just one year,” one of the authors of the study explained. “In crops where technologies didn’t exist for quick mechanisation — like asparagus and fresh strawberries — exclusion of bracero caused sharp declines in production.”

Thus removing immigrants did not benefit natives. Had the immigrants stayed, the natives would have moved on to better jobs and stayed ahead of the curve. Instead, the quantity of crops dropped and the Mexicans went back to lives they were trying to get away from. All with no benefit to the natives.

How much do immigrants take away?

Let's also look at the other side of the equation. Apart from what they contribute, how much do immigrants take away from the country in which they land up in?

Looking at a study conducted about immigrants in the US as explained by Vox, the answer could be 97.8 percent. Not 97.8 percent of everything. But 97.8 percent of the increase in GDP that they caused. Thus they managed to be better off without making their adopted country worse off. And they in fact managed to contribute something. And that amount was not insignificant. In that study, immigrants boosted the economy by $1.6 trillion. They took 97.8 percent, but the US got 2.2 percent. That's close to $35 billion for just allowing people in and letting them work. Doesn't sound like too bad a deal.

The world is progressing at a rapid pace and the advent of machines means that merely decreasing competition will not boost wages and jobs. The unintended consequences of stopping immigrants from coming in are negative as has been seen in the studies mentioned above. Even apart from the sheer monetary benefits, the ideal must be to take in people seeking to build a better life for themselves. The countries where people want to immigrate to are those which have ample resources. They must try to build a better, more complete society with them, rather than exclude them and live in a world which tries to run away from the future.

Economics has long been a convenient veil behind which to hide one's xenophobia. But scores of studies have show that it does not make any sense to block out immigrants because they end up having a positive effect on the economy. Thus when Trump and his administration point to the economy when justifying their anti-immigrant actions, the people need to turn around and tell them to come up with something better.


Published Date: Aug 04, 2017 02:47 pm | Updated Date: Aug 04, 2017 02:47 pm


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